Cisco Down, HP Up In Declining Ethernet Switching Market

The Ethernet switching market fell sharply in the first quarter of 2014 as market leader Cisco saw weaker-than-usual sales, according to a new report from analyst firm Infonetics this week.

According to the report, worldwide Ethernet switching revenue "plummeted" 15 percent year-over-year to $4.8 billion in the first quarter.

While switch manufacturers including Hewlett-Packard, Juniper Networks, and Arista Networks saw growth, Cisco's revenue was down 7 percent compared to the same period last year, the report showed. Cisco was unavailable for comment.

“In the first quarter of 2014, Ethernet switch revenue declined sharply, as a strong performance by Juniper and Arista was not enough to offset weak results at number-one Cisco. For now, the positive growth momentum that developed in the second half of 2013 has stalled,” wrote Matthias Machowinski, directing analyst for enterprise networks and video at Infonetics, in the report.

Infonetics said Juniper's Ethernet switching revenue was up 52 percent and HP's was up four percent. Arista Networks, which Thursday raised $225 million in its initial public offering (IPO), was up over 90 percent.

Bill Smeltzer, CTO at Focus Technology Solutions, a Seabrook, N.H.-based Cisco partner, said he isn't seeing any big changes in his Cisco switch sales this year. But he also said customers are starting to consider Ethernet switching a "commodity" – particularly with the growth of software-defined networking – and, as a result, are sometimes seeking lower-cost alternatives to Cisco.

"Cisco has worked hard to change some of that, in terms of their pricing structure, and they have even put out a few new switch lines recently that are less expensive switch lines," Smeltzer said. "But there is just this perception that Cisco is like Mercedes or Lexus or BMW. It's more money than anything else."

Smeltzer said that while his Cisco switching business is steady, his company is seeing solid growth with rival switch makers like Extreme Networks and HP.

"HP has done such a good job of positioning that ProCurve [switch] line with that lifetime warranty," Smeltzer said. "People just look at HP as cheap, good switching."

Chad Williams, vice president of research & engineering and named accounts at Matrix Integration, a Jasper, Indiana-based Cisco partner, agreed that Ethernet switches are being viewed more and more as a commodity product among customers.

"Revenue, from a hardware perspective, will continue to go down slightly, just because the cost of the hardware is going to come down as more of this open networking and SDN stuff starts to become adopted," Williams said.

Williams said both his Cisco and HP switching businesses are up compared to last year, but HP is "up more."

"You obviously can't always just buy the cheapest switch. But there is a line," Williams said. "You don’t need every feature under the sun, as long as it's feature-rich and includes everything you need, which is typically where HP falls."